Trade Promotion Authority
President George W. Bush signed the Trade Act of 2002 (HR 3009) on August 6, 2002. The act gives the U.S. president Trade Promotion Authority (TPA), under which future international trade agreements will be subject to an up-or-down vote, but not amendment, in Congress. TPA is designed to promote freer trade by giving other countries confidence that the agreements they negotiate with the United States will not be subject to subsequent renegotiation.
Parity in Labor Standards and Environmental Laws
Discrepancies in labor and environmental regulations among trading nations have formed another barrier to free
FIGURE 3.5
trade. The administration of President Bill Clinton pushed to impose the same labor and environmental standards on trading nations that the U.S. imposes on itself. The move was designed to discourage trading partners from exploiting workers and abusing the environment in order to keep capital costs lower and prices down, thus making their goods and services more competitive than U.S. goods in the global market. Before NAFTA was signed, the United States insisted on assurances from Canada and Mexico that they would enforce labor and environmental laws before it would ratify the agreement.
Offshoring
In an effort to reduce labor costs, some firms have closed their facilities in the United States and transferred production and other operations to foreign countries. Commonly referred to as offshoring, this practice is hotly debated. Critics say that it is costing the U.S. economy jobs, pointing to a decline in employment during the recovery from the 2001 recession. They point specifically to job layoffs and lack of job creation during the recovery. In "Offshoring, Import Competition, and the Jobless Recovery" (August 2004), Charles L. Schultze of the Brookings Institution estimated that extended mass layoffs (layoffs affecting at least fifty employees and lasting at least thirty-one days) for causes other than the ending of seasonal jobs averaged 900,000 a year in 2002 and 2003.
The Bureau of Labor Statistics began tracking extended mass layoffs specifically resulting from domestic and overseas job relocations during the first quarter of 2004. According to a BLS press release issued June 10, 2004, "Of the 239,361 private-sector nonfarm workers who were separated from their jobs for at least thirty-one days in the first quarter of 2004, the separations of 4,633 workers were associated with the movement of work outside of the country, according to preliminary data. Domestic relocation of work—both within the company and to other companies—affected 9,985 workers." Overseas relocations within the same company accounted for 2,976 lost jobs, with 1,657 jobs lost to overseas workers in another company. Domestic relocations within the same company accounted for 8,191 separations, and 1,794 positions were moved to another company within the United States.
Others argue, however, that relocation of some operations to foreign countries has a very limited effect on domestic employment. They suggest that fast growth in worker productivity, as shown in Figure 3.5, can explain why employment has not risen despite economic recovery, and they argue that offshoring leads to lower prices for consumer and investment goods, with the ultimate effect of raising real wages (wages that are adjusted for changes in the price of consumer goods) and living standards in the United States.
Intellectual Property
Technological advancements have posed new challenges to world trade. As private-sector investment in information technology continues, world economies are becoming even more interconnected. Proponents of free trade, including the United States, have pushed for more protection of intellectual property rights, abuse of which poses a major barrier to world trade. As defined by the UN in the Convention Establishing the World Intellectual Property Organization (July 14, 1967; amended September 28, 1979), intellectual property comprises:
- "literary, artistic and scientific works
- performances of performing artists, phonograms, and broadcasts
- inventions in all fields of human endeavor
- scientific discoveries
- industrial designs
- trademarks, service marks, and commercial names and designations
- protection against unfair competition and all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields"
Challenges for the international community include establishing minimum standards for protecting intellectual property rights and procedures for enforcement and dispute resolution. These challenges are not new. As early as 1883, with the fourteen-member Paris Union for the Protection of Industrial Property, states recognized the special nature of creative works, including inventions, trademarks, and industrial designs. Soon afterward, in 1886, the Berne Union for the Protection of Literary and Artistic Works extended the model of international protection to such copyrighted works as novels, short stories, poems, plays, songs, operas, musicals, sonatas, drawings, paintings, sculptures, and architectural works.
WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO). In 1893 the two organizations combined to form the United International Bureaus for the Protection of Intellectual Property, which maintained its headquarters in Berne, Switzerland. This organization evolved eventually into the World Intellectual Property Organization (WIPO), located in Geneva, Switzerland, which carries out a program designed to
- harmonize national intellectual property legislation and procedures
- provide services for international applications for industrial property rights
- exchange intellectual property information
- provide legal and technical assistance to developing and other countries
- facilitate the resolution of private intellectual property disputes, and
- marshal information technology as a tool for storing, accessing, and using valuable intellectual property information
As of 2005 WIPO included 182 contracting parties, including the United States, United Kingdom, Russia, and Germany (all joined in 1970). Other member states include Argentina (1980), Czech Republic (1993), China (1980), Iran (2002), Japan (1975), Mexico (1975), New Zealand (1984), Saudi Arabia (1982), Thailand (1989), and Vietnam (1976). The most recent additions include Maldives and Syria (both 2004), and Comoros (2005).
FEDERAL INITIATIVES. In March 2004 Attorney General John Ashcroft established an Intellectual Property Task Force within the Department of Justice (DOJ). After six months of work, the task force published recommendations that emphasized the need for criminal prosecution both at home and abroad, called for additional regulatory measures, and advocated public education about the negative impact of intellectual property crime on the American economy. According to a press release issued by the DOJ on October 12, 2004, "Intellectual property industries play a significant role in the American economy. They make up approximately 6% of the gross domestic product, employ more than five million people, and contribute $626 billion to the U.S. economy. The increasing value of intellectual property, coupled with the ease and low cost of copyright infringement, has significantly increased the destructive consequences of intellectual property theft."
At virtually the same time, the Department of Commerce launched the Strategy Targeting Organized Piracy (STOP) initiative in October 2004. STOP measures included establishing a toll-free phone line dedicated to the protection of intellectual property rights (1-866-999-HALT) and a Web site (www.StopFakes.gov) linking businesses to U.S. government agencies engaged in combating intellectual property crimes. According to the Web site, "Bogus products—from CDs, DVDs, software and watches to electronic equipment, clothing, processed foods, consumer products, and auto parts—are estimated to account for up to 7% of global trade and cost legitimate rights holders around the world billions of dollars annually."
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